CFO Barbara Whitehorn began with an overview, calling attention to the city’s structural imbalance, the topic of the infamous 2012 White Paper. For the coming fiscal year, taking into consideration projected growth and inflation, it was estimated revenue would increase $2 million while expenditures increased $3.5 million. While revenues are tracking slightly above expenditures this year; the current trajectory showed FY 2023 expenditures outpacing revenues $148,790,000 to $135,250,000.
Straining the budget for coming years, the city would have to fully-fund initiatives that were funded for only part of the current year. That added another $4 million to the budget. In addition, the Energy Innovation Task Force would become an ongoing part of city operations at a cost of $205,000, and maintenance for new capital improvement projects was estimated to run around $116,000.
Fortunately, Whitehorn was not presenting exactly a continuation budget. Accountants working for the city had reviewed expenditures over the last few years to identify where budgeted funds had not been needed. The managers with oversight were then asked if they could live without those line items, and they consented. This saved the city $2,700,000, narrowing the gap to $3.2 million, an amount Whitehorn described as “not alarming,” but “a normal city thing.” For perspective, Councilor Vijay Kapoor pointed out $3.2 million was only about 1.8% of the city’s entire budget.
Some drivers of the current budget include changes to transit. Grant revenues were down; as Whitehorn described it, the pie stayed the same size, but more people were getting a piece. Then, service expansions implemented only part of last year will be fully-funded. Lastly, the system is operating under a new management contract, which Whitehorn said she understood is, “going extremely well.”
The police department would patrol the new Downtown District for a full year, and more trainees were on payroll to bring staffing to capacity. The city continues to make adjustments to officer pay to keep it competitive, and it now offers perks that have enticed Asheville trainees to work in other jurisdictions, such as shift differentials and foreign language pay.
Other considerations increasing expenditures include a 3% cost of living adjustment for all employees, ongoing market-pay adjustments, and increased employer contributions for insurance and retirement; enhanced IT security; economic development incentives; and restoration to the budget of measures, like maintenance, that were cut for savings last year. Staff in the budget department had been looking at a 5% increase in health insurance, but in light of the city’s claims history felt confident a 2.5% increase would be more on-target.
Whitehorn added Asheville had to be more creative than other cities in filling its budget gap because it does not have the dedicated revenue streams other municipalities enjoy. For example, the city is not allowed to use hotel tax revenues for general-fund purposes, and, because all sales taxes collected are redistributed on a statewide per-capita basis, the city only reaps a portion of the benefits of being a tourist destination.
Revenues are expected to be healthy, with the property tax base projected to increase 3% and sales and other tax revenues expected to increase 6%. Revenues from licensing and permitting were down 10%, the fad in government being to refer to decreases as corrections to unsustainable growth. State utility taxes remained unchanged.
As is customary, nobody mentioned a tax increase this early in the planning process. Strategies the city is considering to close the gap include hiring freezes and tapping into potentials for more revenue from the city’s parking facilities. The city manager’s contingency fund has been eliminated, and discretionary expenditures that can be cut without harming the city’s triple bottom line are being sought.
Whitehorn said there were no intentions to dip into the fund balance, which currently stands near 16.5% of the city’s operating budget. She explained that Moody’s and Standard & Poor’s have given the city triple-A bond ratings. Those ratings are reassessed every time the city issues debt, and that means every year. If a city makes a habit of drawing down its fund balance, that is a sign of unsustainable budgeting, and bond raters will put that city on a credit watch. Whitehorn said the last time the city drew down its fund balance, it was prevented from getting a triple-A rating for almost five years.